Jul

22

I'm sure the Rio trade (well at least the myth) was alive and well on every major exchange floor in the world. It was the last salute, the final straw. When a local trader had just about lost the lot he jumped in a taxi, called his "give up" broker to buy maximum size at the market, and when he got to the airport he made the same call. But this time he asked for the price. If he were in the money nicely, he told the taxi to turn around and head back to work. If not he was on the next one-way flight to Rio!

Today I watching the final round of the British Open, Andres Romero, to name but one professional golfer, had the same sort of explosion, but this was with plenty of cash in his account. He was leading with two holes to play and in trouble, so he goes for the Rio (a difficult low percentage shot). The outcome was no longer in contention — a four shot turn around and a big opportunity, maybe even a lifetime opportunity kissed goodbye!

Admittedly, the trader in trouble is driven by sheer panic. But for the golfer in control it must be too much adrenaline, too much confidence, and how much this victory means that drives everything else literally out the window.

Next time anyone thinks about gearing up above and beyond what they should do with their account size, it may pay to watch a rerun, of the 2007 championships final holes. If the pros are trying it and failing, then best we mere mortals stay right away.

Riz Din writes:

It was beautiful watching how the final two holes at Carnoustie humbled so many players. Romero rose and fizzled like a firework. He took crazy risks toward the end but he had already taken quite a few wild shots on the back nine, and had been rewarded with endless birdies after pulling off one magical putt after another. Before he walked on to the final two holes, I caught him almost laughing to his caddie; even Romero was bewildered at what was happening. Perhaps it felt like an out of body experience. So, come the final two holes, should he suddenly change his game or keep on playing as he had been? Golfers, like tennis players, are a superstitious bunch, and I can see why he chose not to moderate his game.

In trading I believe it is important to set limits and parameters and to modify these constraints only gradually, but in sports the self-reinforcing cycle of the 'mind game' component seems considerably stronger, and it just didn't seem right to deny the gift from the gods of a 'hot streak'. Importantly, Romero didn't seem upset one bit at the end but was highly emotional and what he had achieved. It seemed to be a rare situation of where a player may have had to play below his capacity (at the time) to ensure a win, and brings about many questions about motives and objectives (playing your best vs. winning).

The other lesson came from Open champion, Padraig Harrington. Before the playoff, he sunk the ball into the water twice on the final hole. Watching him play through the 18th, you couldn't tell whether Podraig was playing for a double bogey or a birdie. He gave it his best right at the point when it seemed to be over. Maintaining one's composure at this turning point is very difficult - even Tiger mumbles curses as things go downhill, before switching right back. I believe it is crucial in succeeding in life's competitive endeavors, regardless of the eventual outcome.